American Airlines reported a dip in second-quarter profits on higher costs but offered a positive outlook, saying efforts to boost profits through its “basic economy” option were on track.
Net income declined 15.5 percent to $803 million from the year-ago period.
Revenues rose 7.2 percent to $11.1 billion as the airline cited strong customer demand, especially in the United States and Latin America.
American reported a robust 5.7 percent increase in the ratio of total revenue to available seat mile — a closely-watched metric the company said would rise 0.5 percent to 2.5 percent in the third quarter.
Operating expenses rose due to higher fuel costs and American’s move in April to hike wages on flight attendants and pilots.
“Our investments in our product and our team are beginning to pay real dividends as we give customers more reasons to fly on American,” said American Airlines President Robert Isom.
“When combined with new revenue management tools and sales initiatives targeting high yielding corporate customers, we believe our revenue growth potential is strong.”
American said it has launched its bare-bones “basic economy” service in 78 markets, an effort to compete with low-cost airlines and prod customers to spend more on premium sets.
Basic economy fares are non-refundable and don’t allow customers carry-on bags.
The early results from the program are “in-line with initial expectations,” American said, with about half of customers “buying up” when given that option versus basic economy.
American said there has been “strong” customer response to a new “premium economy service.”
Shares of American rose 2.2 percent to $51.10 in pre-market trading.
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